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Bank A pays 2% interest compounded annually on deposits, while Bank B pays 1.75% compounded daily. a. Based on the EAR (or EFF%), which bank
Bank A pays 2% interest compounded annually on deposits, while Bank B pays 1.75% compounded daily. a. Based on the EAR (or EFF\%), which bank should you use? I. You would choose Bank A because its EAR is higher. II. You would choose Bank B because its EAR is higher. III. You would choose Bank A because its nominal interest rate is higher. IV. You would choose Bank B because its nominal interest rate is higher. V. You are indifferent between the banks and your decision will be based upon which one offers you an and compounding period in order to receive any interest. might be preferable. might be preferable. might be preferable. might be preferable
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